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    March 22, 2024

    Below is our initial take on recent bankruptcy-related developments:

    Fabrics Retailer Jo-Ann Files for Bankruptcy | CNN Business

    Ohio-based fabric and craft retailer Jo-Ann has filed for Chapter 11 bankruptcy protection and has secured $132 million in new funding. The prepack bankruptcy would purportedly decrease its debt of $1 billion by half. The company has nearly 850 stores that will remain open for business along with its website.

    S&K Take: The oft-rumored filing of Jo-Ann, a fabrics and craft retailer, finally took place this week in the District of Delaware. The case is on a 5-week timeline and contemplates a balance sheet reorganization, with DIP participants/Term Lenders taking the majority of the equity (85%) in the reorganized Debtors on account of DIP participation. Term Loan holders that aren’t DIP participants (which held about 65% of the prepetition debt) appear to get 2.5% of the equity for the debt. GUCs (all $216 million) will ride through, with all unexpired leases being assumed. The deal will cut about $555.5 million in debt (adding back the DIP to exit of $142 million). Relatively straightforward, although the absence of any operational fix seems a bit curious.

    EV Startup Fisker Is Getting Closer to Bankruptcy with a Production Halt and a Missed Payment | Quartz

    Manhattan Beach, California-based electric vehicle company Fisker has warned investors of the possibility that it could run out of money by the end of the year and hired advisors in preparation of a potential bankruptcy. The company is now pausing all production for the next six weeks amid ongoing struggles.

    S&K Take: This, dear reader, is your weekly Fisker update. Last week we noted that the company had retained DPW and FTI ahead of a potential bankruptcy. This week we learn that an investor is buying up to $167 million in converts, which gives the company at least a little runway to try to turn the ship around. We also learned that the company has halted production for 6 week (never a good sign) and missed a payment on some 2025 converts (although the company entered into an amendment and a waiver with respect to that default). Sure seems like this one is circling the drain, so we will continue to monitor. Will be interesting to see the mechanics of the new convert investment (and particularly interesting to an eventual UCC if this files).  

    New Jersey Catholic Diocese's $87.5 Million Abuse Settlement Approved | Reuters

    Last Thursday, U.S. Bankruptcy Judge Jerrold Poslusny confirmed the Diocese of Camden’s Chapter 11 bankruptcy protection plan, which allows the New Jersey Diocese to proceed with an $87.5 million settlement of sexual abuse lawsuits. The Diocese originally sought to settle with nearly 300 sexual abuse victims in April 2022, but the deal was caught up in bankruptcy court due to objections by certain insurers.

    Catholic Diocese of Sacramento to File for Bankruptcy Next Month Following Sexual Abuse Lawsuits | Fox40

    The Catholic Diocese of Sacramento announced it will file for Chapter 11 bankruptcy on April 1 in a statement from Bishop Jamie Soto of the Diocese. The Diocese previously stated it would file for bankruptcy in December to address over 200 lawsuits filed by abuse survivors.

    S&K Take: We have covered diocese cases in the past here, so an update on two significant matters. First, the Diocese of Camden in NJ finally got its plan confirmed. The plan construct had been proposed about 2 years ago, but had been held up by insurers arguing that the plan stripped them of their rights to defend against claims for procedural reasons beyond the scope of this blog. The Court actually rejected the initial settlement, but finally approved it this week, allowing for payments to be made to survivors of abuse. The 3 year timeline lines up with most cases, although this feels like it could have been shorter. We have covered Sacramento previously as a bankruptcy candidate, and the Diocese this week confirmed it will be filing on April 1.  

    Celsius Seeks to Claw Back $2 Billion in Customer Withdrawals: Report | Cointelegraph

    Celsius is looking to recover $2 billion from clients who withdrew from the crypto lender shortly before its July 2022 bankruptcy. A Celsius litigation oversight committee has started to contact Celsius users who withdrew over $100,000 in the 90 days before it filed for bankruptcy offering a settlement if they return a percentage of the funds allegedly withdrawn.

    S&K Take: The Celsius litigation oversight committee has announced that it intends to seek to recover from customers that withdrew more than $100,000 in the preference window. These customers would account for $1.5 billion in withdrawals. In related news, the committee also proposed a “limited time” offer to those prospective preference defendants. They can settle their claims for 13.75% of the amount that was withdrawn. Prospective defendants have until April 15 to accept. Don’t wait! Act now! Don’t miss out on this amazing offer!  

    The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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